In Adeva v. Intertek USA, 2010 U.S. Dist. LEXIS 1963 (D.N.J. Jan. 11, 2010), the District of New Jersey, the Court was faced with a question of whether an employer can use the Fluctuating Workweek Method of pay (which is unfortunately sometimes referred to as “Chinese Overtime”) when it gives employees special payments for days off, off shore pay and holiday pay. Under the Fluctuating Workweek Method, an employer must pay its employees a “fixed amount as straight time pay for whatever hours he is called upon to work in a workweek.” 29 C.F.R. § 778.114(a). Judge Chesler held that when an employee receives such payments, the employer is not adhering to the regulation’s fixed salary requirement. “The record demonstrates that Plaintiffs’ compensation for non-overtime hours varied, depending upon earned offshore pay, holiday pay or day-off pay. The Court is convinced that due to such payments, Plaintiffs cannot receive the fixed salary required to apply the FWW.” Adeva, 2010 U.S. Dist. LEXIS 1963, at *7. In reaching this conclusion, the court relied on a 2007 opinion from the Southern District of New York, titled Ayers v. SGS Control Services, Inc., 2007 U.S. Dist. LEXIS 19634 (S.D.N.Y.) which held that since the plaintiffs received sea-pay and day-off pay, their salaries were not fixed, precluding the use of the FWW. Judge Chesler also relied on the First Circuit’s opinion in O’Brien v. Town of Agawam, 350 F.3d 279 (1st Cit. 2003) which held that workers who received additional compensation in the form of shift differential payments could not have received a fixed amount as required by the FWW.
Employees who are paid under the FWW method where they get “half-time” for their hours over forty should be aware if their pay is subject to the bumps described above.

On November 17, 2009, Judge Claudia Wilken of the Northern District of California issued an extraordinarily thoughtful opinion in a case involving the overtime rights of bank employees.  Judge Wilken explained that employers who misclassify employees as exempt from overtime cannot retroactively use the dreaded Fluctuating Workweek Method (“FWM”) of overtime compensation to calculate overtime damages.  After summarizing the legal landscape in great detail, the Judge explained that it is impossible for the employer to retroactively satisfy the FWM’s prerequisites when, in fact, it never paid overtime to the misclassified employees in the first place.  The case is published at Freedman v. Wells Fargo & Co., 2009 U.S. Dist. LEXIS 107044 (N.D. Cal. Nov. 17, 2009), and it is a must-read for any trial lawyer litigating FLSA misclassification cases.